There are certain limitations to take input tax credit which have been explained in following paragraphs:
(i) Where the person claimed input tax fails to pay to the supplier of Goods and/or services, the amount towards the value of supply of goods & services within 180 days from the date of issue of invoice by the supplier, a proportionate of ITC amount shall be added to his output liability, along with interest thereon. Details of such reversal shall be reported in GSTR-2 for the month to immediately following the period of 180 days from the date of issue of invoice.
Although the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both long with tax payable thereon.
(ii) Person shall not be entitled to take input tax credit in respect of any invoice or debit note for the supply of goods or services after furnishing the return under section 39 for the month of September following the end of financial year to which such invoice or debit note pertains or furnishing of annual return whichever is earlier. This time limit shall not be applicable to a claim for reavailing of any credit.
(iii) As per section 17(1) of the CGST Act, 2017 where the goods and/ or services are used by the registered taxable person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. Rule 7 and Rule 8 of Input tax Credit provides for manner to determine the input tax credit attributable for the purpose of business.
(iv) As per section 17(2) of the CGST Act, 2017 where the goods and/or services are used by the registered taxable person
• partly for effecting taxable supplies, Taxable supplies include:
(a) Taxable supplies
(b) Zero Rated Supply
• and partly for effecting exempt supplies, Exempted supplies include:
(a) Exempted Supply
(b) Supply on which recipient liable to pay tax under reverse charge
(c) Transaction in securities
(d) Sale of land
(e) Sale of building subject to para 5(b) of Schedule II of the CGST Act.
The amount of credit shall be restricted to so much of input tax as is attributable to said taxable supplies including zero rated supplies. Rule 7 & Rule 8 of ITC, provide for manner to deters the ITC attributable to taxable Supply
(v) A banking company or a financial institution including a non-banking financial company, engaged in supplying services by way of accepting deposits, extending loans or advances shall have the option to either comply with the provisions above or avail of, every month, an amount equal to fifty per cent of the eligible input tax credit on inputs, capital goods and input services in that month and the rest shall lapse:
Provided that the option once exercised shall not be withdrawn during the remaining part of the financial year:
Provided further that the restriction of fifty per cent shall not apply to the tax paid on supplies made by one registered person to another registered person having the same Permanent Account Number.